Question 1

An example of a microeconomic decision is a situation in which

Accepted Answer

A)  the Federal Reserve considers how much to increase the money supply during the coming month in an effort to constrain the rate of inflation. 
B)  Congress and the president seek to reach a compromise on how much to increase government spending in an effort to influence national expenditures. 
C)  a firm evaluates how much to reduce the price of its product in an effort to influence sales and boost its profits. 
D)  the U.S. Treasury contemplates buying foreign currencies in an effort to influence exchange rates with an aim to boosting demand for U.S. goods and services. 
A)  the Federal Reserve considers how much to increase the money supply during the coming month in an effort to constrain the rate of inflation. 
B)  Congress and the president seek to reach a compromise on how much to increase government spending in an effort to influence national expenditures. 
C)  a firm evaluates how much to reduce the price of its product in an effort to influence sales and boost its profits. 
D)  the U.S. Treasury contemplates buying foreign currencies in an effort to influence exchange rates with an aim to boosting demand for U.S. goods and services.

Question 2

Economic models

Accepted Answer

A)  should be designed so as to capture every detail or interrelationship that exists. 
B)  are simplified representations of the real world. 
C)  must employ the use of laboratory methods. 
D)  All of the above are correct. 
A)  should be designed so as to capture every detail or interrelationship that exists. 
B)  are simplified representations of the real world. 
C)  must employ the use of laboratory methods. 
D)  All of the above are correct.

Question 3

The usefulness of a model is determined by

Accepted Answer

A)  whether it helps to explain or predict real world phenomena. 
B)  whether it possesses realistic assumptions. 
C)  how well it uses the ceteris paribus assumption. 
D)  how many of the possible relationships that exist are included in the model. 
A)  whether it helps to explain or predict real world phenomena. 
B)  whether it possesses realistic assumptions. 
C)  how well it uses the ceteris paribus assumption. 
D)  how many of the possible relationships that exist are included in the model.

Question 4

Normative economic statements

Accepted Answer

A)  violate the law of ceteris paribus. 
B)  contain value judgments. 
C)  are usually irrational. 
D)  are easily testable. 
A)  violate the law of ceteris paribus. 
B)  contain value judgments. 
C)  are usually irrational. 
D)  are easily testable.

Question 5

The idea that people will not consciously make decisions that make them worse off is known as

Accepted Answer

A)  rationality assumption. 
B)  the decision duality. 
C)  Adam Smith's doctrine. 
D)  incentive assumption. 
A)  rationality assumption. 
B)  the decision duality. 
C)  Adam Smith's doctrine. 
D)  incentive assumption.

Question 6

Which of the following would most likely NOT be taught in a macroeconomics course?

Accepted Answer

A)  changes in the health care industry 
B)  factors leading to different economic growth rates among countries 
C)  government actions in response to a slowdown in the economy 
D)  the relationship between the inflation rate and the unemployment rate 
A)  changes in the health care industry 
B)  factors leading to different economic growth rates among countries 
C)  government actions in response to a slowdown in the economy 
D)  the relationship between the inflation rate and the unemployment rate

Question 7

Economics is the study of

Accepted Answer

A)  how to own as many resources as possible. 
B)  ceteris paribus. 
C)  the way people think rather than the way they act. 
D)  how people allocate their limited resources to satisfy their unlimited wants. 
A)  how to own as many resources as possible. 
B)  ceteris paribus. 
C)  the way people think rather than the way they act. 
D)  how people allocate their limited resources to satisfy their unlimited wants.

Question 8

Is inflation a macroeconomic or a microeconomic question? Why?

Accepted Answer

Inflation is a macroeconomic question be

Question 9

"The U.S. government should not use my tax dollars to subsidize people on welfare"

Accepted Answer

A)  is a positive economic statement because it simply describes one person's opinion. 
B)  is a normative economic statement because it involves a value judgment about an economic policy. 
C)  is a positive economic statement because it predicts that my tax dollars will go to welfare. 
D)  is a normative economic statement because it is a scientific fact. 
A)  is a positive economic statement because it simply describes one person's opinion. 
B)  is a normative economic statement because it involves a value judgment about an economic policy. 
C)  is a positive economic statement because it predicts that my tax dollars will go to welfare. 
D)  is a normative economic statement because it is a scientific fact.

Question 10

Positive economic analysis is supposed to be

Accepted Answer

A)  true. 
B)  free of value judgments. 
C)  just and fair. 
D)  moral and honest. 
A)  true. 
B)  free of value judgments. 
C)  just and fair. 
D)  moral and honest.

Question 11

________ are the things that are used to produce items that satisfy people's wants.

Accepted Answer

A)  Concepts 
B)  Production possibilities curves 
C)  Resources 
D)  Costs 
A)  Concepts 
B)  Production possibilities curves 
C)  Resources 
D)  Costs

Question 12

A friend wants to learn how the unemployment rate is calculated and how inflation is measured. He asks you which economics course to take and you advise him to enroll in

Accepted Answer

A)  macroeconomics. 
B)  microeconomics. 
C)  either micro- or macroeconomics. They both concentrate equally on those issues. 
D)  financial accounting because economics doesn't address those topics in its courses. 
A)  macroeconomics. 
B)  microeconomics. 
C)  either micro- or macroeconomics. They both concentrate equally on those issues. 
D)  financial accounting because economics doesn't address those topics in its courses.

Question 13

A good economic model

Accepted Answer

A)  utilizes only the two most important factors to analyze the problem under consideration. 
B)  generates statements that are incapable of refutation. 
C)  represents every detail of the real world. 
D)  yields usable predictions and implications for the real world. 
A)  utilizes only the two most important factors to analyze the problem under consideration. 
B)  generates statements that are incapable of refutation. 
C)  represents every detail of the real world. 
D)  yields usable predictions and implications for the real world.

Question 14

The potential rewards that are available to an individual if a particular activity is undertaken are known as

Accepted Answer

A)  premiums. 
B)  gifts. 
C)  incentives. 
D)  intrinsic values. 
A)  premiums. 
B)  gifts. 
C)  incentives. 
D)  intrinsic values.

Question 15

Underlying economic theory is the idea that

Accepted Answer

A)  people respond only to negative incentives, not to positive ones. 
B)  choices are affected by both positive and negative incentives. 
C)  value judgments do not play a role in the economic decisions people make. 
D)  money is the only incentive that matters. 
A)  people respond only to negative incentives, not to positive ones. 
B)  choices are affected by both positive and negative incentives. 
C)  value judgments do not play a role in the economic decisions people make. 
D)  money is the only incentive that matters.

Question 16

Which of the following would likely be considered as falling into the domain of microeconomics?

Accepted Answer

A)  the U.S. unemployment rate 
B)  the Gross Domestic Product 
C)  the price of apples 
D)  the effects of fiscal policy on the U.S. economy 
A)  the U.S. unemployment rate 
B)  the Gross Domestic Product 
C)  the price of apples 
D)  the effects of fiscal policy on the U.S. economy

Question 17

The idea of bounded rationality is used to address all of the following characteristics EXCEPT

Accepted Answer

A)  unbounded selfishness. 
B)  unbounded knowledge. 
C)  unbounded willpower. 
D)  unbounded rationality. 
A)  unbounded selfishness. 
B)  unbounded knowledge. 
C)  unbounded willpower. 
D)  unbounded rationality.

Question 18

Economics is a part of the

Accepted Answer

A)  social sciences. 
B)  natural sciences. 
C)  biological sciences. 
D)  organizational sciences. 
A)  social sciences. 
B)  natural sciences. 
C)  biological sciences. 
D)  organizational sciences.

Question 19

If two competing models are offered to explain a certain economic phenomenon, the better model is the one

Accepted Answer

A)  that is the newest since newer models are better than old models. 
B)  with the fewest unrealistic assumptions. 
C)  that more often predicts with most accuracy. 
D)  that is not subject to empirical verification. 
A)  that is the newest since newer models are better than old models. 
B)  with the fewest unrealistic assumptions. 
C)  that more often predicts with most accuracy. 
D)  that is not subject to empirical verification.

Question 20

An inverse relationship will be graphed as

Accepted Answer

A)  a line that is upward sloping. 
B)  a line that is downward sloping. 
C)  a loop. 
D)  a U-shaped curve. 
A)  a line that is upward sloping. 
B)  a line that is downward sloping. 
C)  a loop. 
D)  a U-shaped curve.

Exam 1: The Nature of Economics

An example of a microeconomic decision is a situation in which

Economic models

The usefulness of a model is determined by

Normative economic statements

The idea that people will not consciously make decisions that make them worse off is known as

Which of the following would most likely NOT be taught in a macroeconomics course?

Economics is the study of

Is inflation a macroeconomic or a microeconomic question? Why?

"The U.S. government should not use my tax dollars to subsidize people on welfare"

Positive economic analysis is supposed to be

________ are the things that are used to produce items that satisfy people's wants.

A friend wants to learn how the unemployment rate is calculated and how inflation is measured. He asks you which economics course to take and you advise him to enroll in

A good economic model

The potential rewards that are available to an individual if a particular activity is undertaken are known as

Underlying economic theory is the idea that

Which of the following would likely be considered as falling into the domain of microeconomics?

The idea of bounded rationality is used to address all of the following characteristics EXCEPT

Economics is a part of the

If two competing models are offered to explain a certain economic phenomenon, the better model is the one

An inverse relationship will be graphed as

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters